Friday, November 25, 2011

Types of non-tariff barriers (NTBs)

With fast decline in tariffs due to multilateral, regional, bilateral and unilateral liberalizations, non-tariff barriers (NTBs) have become the most important trade policy tool of almost all countries. Some of the commonly used NTBs, sourced from Hiau Looi Kee and Cristina Neagu’s presentation, are listed below:

  • Origin of materials and parts
  • Import license fees
  • Customs inspection fees
  • Testing requirement
  • Direct consignment requirement
  • Requirement to pass through specified port
  • Service charges
  • Labeling requirements
  • Certification requirement
  • Processing history
  • Systems Approach
  • Temporary geographic prohibition for SP
  • Conformity assessments related to SPS
  • Traceability information requirements
  • Certification required by the exporting agencies
  • Storage and transport conditions
  • Microbiological criteria on the final product
  • Quarantine requirement

Tariffs and NTBs can be either substitute or complementary depending on context. To protect key sectors, countries might increase ad valorem equivalent of NTBs by the same magnitude (keeping protection at its optimal level) of a decrease resulting from slashing tariffs, making them substitutes. Meanwhile, trade policies influenced by interests parties through lobbies and government’s care about social welfare as well as campaign contributions would be to both tariffs and NTBs, making it complementary.

NTBs are harder to implement than tariffs as the latter are more transparent in nature. Some NTBs (like RoO) affect multiple industries while tariffs are more targeted. NTBs are not primary revenue generators as tariffs are, which are important for developing countries.

The authors conclude that tariffs and NTBs could be substitutes within importer-HS6 products, comparing across exporters. Example: preferential tariffs often come with RoO requirements. Also, tariffs and NTBs could be compliments within importer-exporter pair, comparing across products. Example: products that have low tariff barriers often have lower NTBs.